Molina Healthcare rises on 4Q income and outlook

Molina Healthcare jumps after 4th-quarter income and 2013 income estimate exceed estimates

NEW YORK (AP) -- Shares of Molina Healthcare Inc. climbed Friday after the Medicaid coverage provider posted a strong fourth-quarter profit and forecast further gains in 2013.

THE SPARK: Molina reported its quarterly results after the market closed on Thursday. The company said medical costs fell in most regions, with significant drops in Texas and California. The Long Beach, Calif., company also said premium rates increased in Texas, Michigan, and Florida and for some members in California.

Molina said its net income totaled $25.6 million, or 54 cents per share. A year ago the company took a large impairment charge related to health plan in Missouri, and it lost $33 million, or 72 cents per share. Revenue rose 21 percent, to $1.58 billion from $1.31 billion.

Analysts were expecting net income of 22 cents per share and $1.58 billion in revenue, according to FactSet.

The results included several large one-time items, including a $30 million gain in its Texas business because some previous medical costs were less than Molina had originally estimated.

THE BIG PICTURE: Molina is doing business in nine states, as its contract with the state of Missouri expired during the year. Its membership grew to about 1.8 million people from 1.7 million a year ago. In 2012 its net income fell 53 percent, to $9.8 million, or 21 cents per share, and revenue rose 26 percent to $6.03 billion.

The company said it expects to earn $1.55 per share on $7 billion in revenue in 2013.

Analysts are forecasting income of $1.43 per share and $7.4 billion on average.

THE ANALYSIS: Citi Investment Research analyst Carl McDonald said the company's profit margins are getting better, a trend that continued during the fourth quarter. He said Molina can continue to focus on further improvement since it does not have any major new contracts starting up in the first half of 2013. Later in the year its business in Ohio will expand as a contract for "dual-eligible" Medicare and Medicaid members kicks in.

The federal Medicare program serves the elderly and disabled, while Medicaid provides coverage for the poor though state and federal funding. They generally help pay for different things and operate independently, so patients who are in both programs can generate a significant increase in costs. Some states are moving them into managed care programs that coordinate care and cut wasteful spending.

McDonald said Molina's results were not quite as strong as they appear because of the one-time gain in Texas and other items that boosted its results. However he said the company's results were better than expected even if those items are left out.

SHARE ACTION: Molina shares rose $3.01, or 10.4 percent, to $31.88. On Oct. 23 the company reported stronger-than-expected earnings for the third quarter, and its shares have advanced 40 percent since then.